<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from ______ to ________
Commission File Number 0-29772
IVI CHECKMATE CORP.
(Exact name of Registrant as specified in its charter)
Delaware 58-2375201
(State of (I.R.S. Employer
Incorporation) Identification No.)
1003 Mansell Road, Roswell, Georgia 30076
(Address of principal executive offices, including zip code)
(770) 594-6000
(Registrant's telephone number, including area code)
______________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
----- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at August 8, 2000
----------------------------- -----------------------------
Common Stock, $0.01 par value 18,155,569 shares
<PAGE>
IVI CHECKMATE CORP.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2000
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
------
<S> <C> <C>
Item 1 Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets - June 30, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Operations - Three and Six
Months Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements - June 30, 2000 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosure of Market Risk 11
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX OF EXHIBITS 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Per Share Data)
<TABLE>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,950 $ 8,279
Accounts receivable, net 22,963 20,050
Inventories, net 20,635 20,278
Deferred tax asset 1,384 848
Prepaid expenses and other assets 339 502
-------- --------
Total current assets 51,271 49,957
Property and equipment, net 9,255 9,654
Capitalized software development costs, net 12,913 12,822
Intangible assets, net 739 1,064
Other assets 194 28
-------- --------
Total assets $ 74,372 $ 73,525
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit $ 5,070 $ -
Accounts payable 10,956 12,255
Accrued liabilities 9,962 11,273
Deferred revenue 2,938 3,350
Other 10 13
-------- --------
Total current liabilities 28,936 26,891
Deferred tax liability 1,462 1,500
Other - 4
-------- --------
Total liabilities 30,398 28,395
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value 8 8
Common stock, $0.01 par value 183 182
Additional paid-in capital 89,495 88,962
Accumulated deficit (44,316) (43,066)
Accumulated comprehensive loss (1,396) (956)
-------- --------
Total stockholders' equity 43,974 45,130
-------- --------
Total liabilities and stockholders' equity $ 74,372 $ 73,525
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues $24,910 $28,633 $48,179 $43,743
Cost of sales 15,292 22,212 29,787 31,600
Amortization of software
development costs 1,243 771 2,175 1,402
------- ------- ------- -------
Gross profit 8,375 5,650 16,217 10,741
------- ------- ------- -------
Operating expenses:
Selling, general and
administrative 7,596 8,547 15,068 15,107
Research and development 679 998 1,555 2,234
Depreciation and amortization 655 632 1,270 1,156
------- ------- ------- -------
8,930 10,177 17,893 18,497
------- ------- ------- -------
Operating loss (555) (4,527) (1,676) (7,756)
Interest and other (13) (105) 9 (156)
------- ------- ------- -------
Loss before taxes (568) (4,632) (1,667) (7,912)
Income tax benefit 142 1,390 417 2,374
------- ------- ------- -------
Net loss $ (426) $(3,242) $(1,250) $(5,538)
======= ======= ======= =======
Weighted average number
of shares outstanding (000's)
- basic and diluted:
18,224 18,114 18,187 18,093
Net loss per share available
to common stockholders
- basic and diluted $ (0.04) $ (0.19) $ (0.09) $ (0.32)
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
IVI CHECKMATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
2000 1999
------------ -----------
<S> <C> <C>
Operating activities:
Net loss $(1,250) $(5,538)
Depreciation and amortization 3,866 3,112
Deferred income taxes and other (612) (2,279)
Change in non-cash working capital:
Accounts receivable (3,063) 7,477
Inventories (430) (4,836)
Prepaid expenses and other current assets 161 (125)
Accounts payable and accrued liabilities (2,139) 4,477
Deferred revenue (393) (232)
-------- --------
Net cash provided by (used in) operating activities (3,860) 2,056
-------- --------
Investing activities:
Purchases of property and equipment (1,035) (2,147)
Capitalized software development costs (2,214) (2,920)
Other (165) (127)
-------- --------
Net cash used in investing activities (3,414) (5,194)
-------- --------
Financing activities:
Borrowings of bank line of credit - net 5,070 -
Proceeds from issuance of common stock 51 1,158
Other (7) (43)
-------- --------
Net cash provided by financing activities 5,114 1,115
-------- --------
Effect of exchange rate fluctuations on cash (169) 278
-------- --------
Net decrease in cash and cash equivalents (2,329) (1,745)
Cash and cash equivalents at beginning of period 8,279 9,846
-------- --------
Cash and cash equivalents at end of period $ 5,950 $ 8,101
======== ========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
IVI CHECKMATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands of dollars, except per share data)
(Unaudited)
June 30, 2000
1. Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of IVI Checkmate Corp. and our wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
We have prepared these statements in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In our opinion, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These statements should be read in
conjunction with our audited financial statements for the year ended December
31, 1999. Operating results for the three and six months ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000 or any other interim period.
2. Inventories
Inventories are summarized by classes as follows:
<TABLE>
June 30, December 31,
2000 1999
------- ------------
<S> <C> <C>
Finished goods $12,145 $12,578
Consignment 6,551 2,040
Work in process 2,984 2,798
Raw materials and supplies 5,007 9,873
------- -------
Gross inventories 26,687 27,289
Less obsolescence reserves (6,052) (7,011)
------- -------
Total $20,635 $20,278
======= =======
</TABLE>
6
<PAGE>
3. Net Loss Per Share
Net loss per share on a basic and diluted basis as required by Statement No. 128
is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $ (426) $(3,242) $(1,250) $(5,538)
Less: Preferred dividends (163) (163) (326) (163)
------- ------- ------- -------
Net loss available to common stockholders
(589) $(3,405) $(1,576) $(5,701)
======= ======= ======= =======
Calculation of weighted average shares
outstanding plus assumed conversions (000's):
Weighted average basic shares outstanding 18,224 18,114 18,187 18,093
Effect of dilutive stock options - - - -
------- ------- ------- -------
Weight average diluted shares outstanding 18,224 18,114 18,187 18,093
======= ======= ======= =======
Basic and diluted net loss per share available
to common stockholders $ (0.04) $ (0.19) $ (0.09) $ (0.32)
======= ======= ======= =======
</TABLE>
The effect of dilutive securities excludes those stock options and convertible
preferred shares for which the impact of exercise or conversion would have been
anti-dilutive. All options and convertible preferred stock outstanding at June
30, 2000 and 1999 were anti-dilutive.
4. Segment Disclosures
Selected Financial Results
--------------------------
<TABLE>
<CAPTION>
Operating Depreciation/
Revenues Income(Loss) Amortization
--------- ------------ -------------
<S> <C> <C> <C>
Three Months Ended June 30, 2000:
Domestic $19,134 $ (851) $1,544
International 5,833 296 477
------- ------- ------
Segmented total 24,967 (555) 2,021
Intersegment sales (57) - -
------- ------- ------
Consolidated total $24,910 $ (555) $2,021
======= ======= ======
Three Months Ended June 30, 1999:
Domestic $23,981 $(4,571) $1,248
International 4,841 44 466
------- ------- ------
Segmented total 28,822 (4,527) 1,714
Intersegment sales (189) - -
------- ------- ------
Consolidated total $28,633 $(4,527) $1,714
======= ======= ======
Six Months Ended June 30, 2000:
Domestic $36,745 $(2,303) $2,891
International 11,493 627 975
------- ------- ------
Segmented total 48,238 (1,676) 3,866
Intersegment sales (59) - -
------- ------- ------
Consolidated total $48,179 $(1,676) $3,866
======= ======= ======
Six Months Ended June 30, 1999:
Domestic $34,072 $(8,194) $2,199
International 9,860 438 913
------- ------- ------
Segmented total 43,932 (7,756) 3,112
Intersegment sales (189) - -
------- ------- ------
Consolidated total $43,743 $(7,756) $3,112
======= ======= ======
</TABLE>
7
<PAGE>
4. Segment Disclosures (continued)
Identifiable Assets
-------------------
<TABLE>
At At
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Domestic $50,767 $48,372
International 22,822 25,153
------- -------
Segment total 73,589 73,525
Tax adjustment 783 -
------- -------
Consolidated total $74,372 $73,525
======= =======
</TABLE>
5. Comprehensive Loss
Total comprehensive loss, which consists of net loss and foreign currency
translation adjustments, is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss $(426) $(3,242) $(1,250) $(5,538)
Foreign currency translation gain
(loss) (354) 309 (440) 531
----- ------- ------- -------
Comprehensive loss $(780) $(2,933) $(1,690) $(5,007)
===== ======= ======= =======
</TABLE>
6. Recent Accounting Pronouncement
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", or SAB 101. SAB
101 summarizes certain of the SEC Staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. Although
we are currently evaluating the impact of SAB 101, we believe that our current
practices comply with SAB 101. However, should we determine that a change in
accounting policy is necessary, such a change will be made in the fourth quarter
of 2000.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains forward-looking statements subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995. The
words "may," "would," "could," "will," "expect," "estimate," "anticipate,"
"believe," "intends," "plans" and similar expressions and variations thereof are
intended to identify forward-looking statements. We caution that these
statements represent projections and estimates of future performance and involve
certain risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors including, without limitation, rapid and significant technological
developments that could delay the introduction of improvements in existing
products or of new products; dependence on limited suppliers and manufacturers
of component parts of our products; dependence on our proprietary technologies
(which may be independently developed by competitors); dependence on a small
number of large retail and bank customers; potential fluctuation in financial
results as a result of any inability to make sales to large customers as well as
the volume and timing of bookings received during a quarter and variations in
sales mix; competition from existing companies as well as new market entrants;
dependence on key personnel; and other risk factors that are contained in
documents that we file with the U.S. Securities and Exchange Commission.
RESULTS OF OPERATIONS
Net Revenues
------------
Net revenues for the three months ended June 30, 2000 declined 13% to $24.9
million from $28.6 million for the three months ended June 30, 1999. The decline
was attributable to several product shipments that were delayed until the third
quarter of 2000, due to a limited supply of available component parts that are
used in the manufacturing of our products, and as a result of transitioning our
manufacturing operations from internal production to complete outsourcing. We do
not anticipate these factors to significantly affect revenues in future
quarters. Net revenues for the six months ended June 30, 2000 increased 10% to
$48.2 million from $43.7 million as strong product sales in the U.S. in the
first quarter were sufficient to offset the decline in second quarter revenues.
Cost of Sales
-------------
Cost of sales (excluding amortization of software development costs)
declined by 31% to $15.3 million for the three months ended June 30, 2000 from
$22.2 million for the three months ended June 30, 1999, and declined by 6% to
$29.8 million for the six months ended June 30, 2000 from $31.6 million for the
six months ended June 30, 1999. As a percentage of net revenues, cost of sales
(excluding amortization of software development costs) for the three and six
months ended June 30, 2000 were 61% and 62%, respectively. In comparison,
corresponding percentages for the three and six months ended June 30, 1999 were
78% and 72%, respectively. The improvement in the cost of sales percentages was
due to a more favorable customer mix in 2000, and an inventory writedown of
approximately $2.7 million that was recorded in the three months ended June 30,
1999 for product issues related to our e/N/-Touch payment terminal.
Amortization of Software Development Costs
------------------------------------------
Amortization of software development costs for the three and six months
ended June 30, 2000 increased 61% to $1.2 million for the three months ended
June 30, 2000 from $771,000 for the three months ended June 30, 1999, and
increased by 55% to $2.2 million for the six months ended June 30, 2000 from
$1.4 million for the six months ended June 30, 1999. The increase resulted as we
began to amortize previously capitalized software development project costs that
have reached commercial production.
9
<PAGE>
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses for the three months ended
June 30, 2000 declined 11% to $7.6 million from $8.5 million for the three
months ended June 30, 1999. The savings realized were the result of an
initiative that began in June 1999 related to personnel assessment and
termination where appropriate. Despite the savings realized in the second
quarter, selling, general and administrative expenses for each of the six months
ended June 30, 2000 and 1999 were $15.1 million as operating expenses of our
Financial Systems division, acquired in April 1999, were not reflected in the
first quarter of 1999. As a percentage of revenues, selling, general and
administrative expenses for the three and six months ended June 30, 2000 were
30% and 31%, respectively. In comparison, corresponding percentages for the
three and six months ended June 30, 1999 were 30% and 35%, respectively.
Research and Development
------------------------
Net research and development expenditures for the three and six months
ended June 30, 2000 declined to $679,000 and $1.2 million, respectively,
compared to $1.0 million and $2.2 million for the three and six months ended
June 30, 1999, respectively. As a percentage of revenues, net research and
development expenditures for the three and six months ended June 30, 2000 were
2.7% and 3.2%, respectively. In comparison, corresponding percentages for the
three and six months ended June 30, 1999 were 3.5% and 5.1%, respectively. The
decline in expenditures reflects a smaller proportion of engineering costs
attributable to development projects.
Liquidity and Capital Resources
-------------------------------
Our primary operating cash needs include the payment of salaries, payments
to suppliers, office rent, travel expenses, and other general and administrative
expenses, as well as capital expenditures and research and development. We
finance these expenditures, as well as acquisitions, with cash flow from
operations and the issuance of equity securities, as well as borrowings from
time to time under lines of credit.
In April 2000, we replaced our existing U.S. lines of credit with a new
line of credit from Congress Financial. This new line of credit provides for
borrowings of up to $15 million provided that certain covenants pertaining to
equity are maintained. Borrowings of $4.5 million outstanding under the old
lines of credit were repaid with funding provided under this new line of credit.
At June 30, 2000, we had working capital of approximately $22 million
compared to approximately $23 million in working capital at March 31, 2000 and
December 31, 1999. Working capital at June 30, 2000 included available cash on
hand of approximately $6 million, all of which is held by our Canadian
subsidiary. Consequently, as of June 30, 2000, we borrowed an additional
$600,000, in addition to previous borrowings, under our Congress Financial line
of credit to temporarily fund operating cash requirements in the U.S.
During the six months ended June 30, 2000, approximately $3.9 million in
cash was used in operating activities, with an additional $3.4 million used for
purchases of property and equipment and software development costs. These
activities were funded by a $2.3 million reduction in available cash on hand in
addition to the borrowed funds.
We believe that our working capital position at June 30, 2000, together
with anticipated future cash flows from operations and the borrowings available
under our revolving credit lines, will be sufficient to meet our cash operating
needs for the remainder of the year and 2001. We anticipate that our borrowings
will be repaid in its entirety by the end of the year.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
There has been no material change during the quarter ended June 30, 2000
from the disclosures about market risk provided in Item 7A of our Annual Report
on Form 10-K for the year ended December 31, 1999.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual meeting of stockholders on May 18, 2000. A total of 8,458,162
shares of common stock of the Company and exchangeable shares of IVI Checkmate
Ltd., which totaled 61% of the shares eligible to be voted at the annual meeting
were cast.
The following directors were elected at and continued in office after the
meeting:
<TABLE>
<CAPTION>
Number of Shares
-------------------
Director For Withheld
---------------- --------- --------
<S> <C> <C>
Gerard Compain 8,350,269 107,893
Paul W. Noblett 8,353,520 104,642
Bertil D. Nordin 8,351,420 106,742
Gareth Owen 8,350,309 107,853
Peter E. Roode 8,351,265 106,897
J. Stanford Spence 8,350,720 107,442
L. Barry Thomson 8,344,565 113,597
George Whitton 8,350,565 107,597
</TABLE>
ITEM 5. OTHER INFORMATION
On June 13, 2000, we consummated a merger that resulted in us acquiring the
remaining shares of common stock of National Transaction Network, Inc. we did
not previously own. In exchange for these shares, we issued 57,267 registered
shares of our common stock to National Transaction Network stockholders. Prior
to the merger, we owned approximately 82% of National Transaction Network's
common stock.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as part of this report:
---------
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
On April 28, 2000, we filed a Current Report on Form 8-K to report our
interim financial statements for the quarter ended March 31, 2000.
On June 14, 2000, we filed a Current Report on Form 8-K to report that we
had consummated a merger that resulted in our acquiring the remaining
common shares of National Transaction Network, Inc. that we did not
previously own.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IVI CHECKMATE CORP.
(Registrant)
Date: August 8, 2000 /s/ L. Barry Thomson
--------------------
L. Barry Thomson
President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 8, 2000 /s/ John J. Neubert
-------------------
John J. Neubert
Executive Vice President - Finance
and Administration, Chief Financial
Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
13
<PAGE>
INDEX OF EXHIBITS
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
14
